Matinas BioPharma Holdings, Inc. — Q1 2019 10-Q
Business context and period. This clinical-stage biopharmaceutical company reported for the three months ended March 31, 2019. Its development focus includes MAT9001, an omega-3 candidate, and MAT2203, which uses its lipid nano-crystal (LNC) delivery platform. It has no approved products and has not generated product sales.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $0 | $29,937 contract research revenue |
| Research and development expense | $2.315 million | $2.193 million; increased $0.1 million, principally from clinical development and overhead |
| General and administrative expense | $1.788 million | $1.958 million; decreased $0.2 million, principally from lower compensation expense |
| Operating loss | $4.103 million | $4.121 million |
| Net loss | $4.051 million | $4.110 million |
| Net loss attributable to common shareholders | $4.316 million; $0.04 per share | $4.257 million; $0.05 per share |
| Cash used in operating activities | $3.023 million | $2.806 million |
Gross margin is not meaningful given the absence of revenue in Q1 2019. At March 31, cash and cash equivalents were $39.4 million, with $0.6 million of restricted cash. Current assets were $39.9 million and current liabilities $3.1 million. Total liabilities were $7.6 million, including $4.4 million of operating lease liabilities and $0.2 million of finance lease liabilities; the note payable balance was $80,000. The filing reports no off-balance-sheet arrangements.
Financing activities provided $30.0 million in the quarter, primarily from a common-stock offering; investing activities used $14,000. The offering and over-allotment added approximately $30.2 million in net proceeds in total. Common shares outstanding increased from 113.3 million at year-end 2018 to 143.0 million at March 31, 2019. Management said cash on hand was expected to fund planned operations beyond May 2020, and elsewhere stated it expected funding through 2020.
Material changes and notable items
- Operating cash use rose by approximately $0.2 million year over year, while total operating expenses declined slightly. Net loss improved by approximately $0.1 million.
- The March equity offering materially increased cash and equity, while diluting existing shareholders. Potential dilution also includes convertible preferred stock, options and warrants.
- Adoption of lease accounting on January 1, 2019 brought operating lease right-of-use assets and liabilities onto the balance sheet. At March 31, operating lease liabilities totaled $4.4 million.
- The company continued to accrue preferred-stock dividends. Series A preferred shares carry an 8% annual dividend and royalty rights tied to MAT2203 and MAT2501; Series B dividends are payable in common shares under specified terms.
Outlook, risks and controls
Management expects continued substantial losses and increasing expenses, including higher research and development spending as programs advance. Priorities for 2019 included advancing MAT9001 toward development for severe hypertriglyceridemia, pursuing MAT2203 efficacy data in cryptococcal meningitis with NIH support, and exploring LNC-platform collaborations. The filing says the company does not expect FDA approval of a product candidate before 2023 at the earliest. It anticipates needing additional financing; future funding may be unavailable or may dilute shareholders, add fixed obligations, or require granting rights to candidates or technology.
Key risks include clinical or regulatory delays or failures, manufacturing and third-party dependence, intellectual-property protection, and the need to raise capital. The company reported no material change to the risk factors in its 2018 Form 10-K and no legal proceedings. It disclosed that disclosure controls were not effective at March 31, 2019 because previously identified material weaknesses in financial reporting remained unremediated. Weaknesses related to formal transaction and reporting procedures and insufficient accounting staffing and expertise; remediation was ongoing.
Commitments include NIH research agreements, including renewals and an additional three-year CRADA entered into after quarter-end, and potential future royalties and license fees. No royalty-payment accrual was recorded because payment was not considered probable at the reporting date.
Investor verification priorities
- Confirm the assumptions behind the stated cash runway through 2020 and the expected increase in operating cash use.
- Track clinical, regulatory and manufacturing milestones for MAT9001 and MAT2203, including the timing and funding of NIH-supported work.
- Assess dilution from the March offering and potential conversion or exercise of preferred stock, options and warrants.
- Review remediation progress on the disclosed material weaknesses and whether disclosure controls become effective.
- Verify the terms and potential economic impact of lease obligations, preferred-stock dividends and royalty rights.